MUMBAI: A report that the US and Iran were inching closer to a preliminary deal to end the war in West Asia pulled down crude prices sharply, strengthened the rupee against the dollar and led to a rally in bond markets globally. This in turn led to a late rally on Dalal Street that lifted the sensex by 941 points on Wednesday to close near the 78,000 mark, with banking and financial services stocks like HDFC, ICICI and SBI contributing the most to the index's gain.
Short Covering and Wealth Addition
Some short covering during the closing hours of the session also helped the rally, market players said. The rally added nearly Rs 6 lakh crore to investors' wealth, with BSE's market cap at Rs 472.8 lakh crore, data showed.
Global and Domestic Cues
According to Vinod Nair, head of research at Geojit Investments, the rally in the domestic markets was on the back of a risk-on sentiment, driven by easing US–Iran tensions and China's diplomatic engagement, which helped contain crude prices, though the trend remains headline-sensitive. Global cues were further strengthened by strong AI-led tech earnings and large fund-raises, while yen-led dollar weakness aided EM flows. Domestically, favourable political cues, improving infra executions, and ECLGS 5.0 approval remain supportive, especially for MSME sectors.
Oil-Sensitive Stocks React
Stocks sensitive to oil prices reacted sharply. Airlines leader IndiGo, which has been facing high fuel costs leading to higher-priced tickets for its passengers, rallied to close 6.6% up, while ONGC, which prices its crude based on international rates and benefits more when crude prices are higher, closed 3.1% lower.
US-Iran Peace Deal Hopes
According to a note by Ponmudi R, CEO of Enrich Money, a wealth-tech platform, US President Donald Trump's decision to pause Project Freedom, the plan to guide ships through the Strait of Hormuz that had threatened the fragile ceasefire, boosted investor sentiment globally. In addition, reports that the US and Iran were closing in on a one-page MOU to end the war collectively eased near-term escalation fears and renewed hope for a peace deal, driving a broad-based advance across global markets as most markets ended firmly in the green and energy prices slid on expectations of easing supply disruptions.
Market Jitters and Crude Rebound
Global markets, however, turned jittery by evening after Trump threatened Iran again with 'higher level' bombing if it did not agree to the peace deal. At the same time, reports originating in Iran said that the government there had not agreed to a deal with the US. Brent crude, which had fallen below the psychologically important $100/barrel level earlier in the day, again inched up to $103.5 level. In opening trades, the US markets showed signs of strength, with each of the three leading indices—Dow Jones, S&P 500 and Nasdaq Composite—up nearly 1%.
